Global reinsurers are making the most of the current hard market conditions in property catastrophe risks, according to S&P. The top reinsurers have been increasing their exposure to natural catastrophes throughout 2023 and this trend seems to be continuing into 2024.
S&P Global Ratings has noted that the favorable pricing environment and improving investment income have allowed reinsurers to expand their property catastrophe business. They predict that global reinsurers will take advantage of these conditions in the next couple of years, albeit with caution.
The analysts at S&P attribute the strong results of 2023 to significant pricing increases and a lower loss experience, particularly in the property catastrophe segment. This has encouraged reinsurers to boost their exposure to these risks. The recent pricing corrections and higher attachment points have also played a role in this increase in risk exposure among the top players.
While reinsurers are optimistic about deploying more capital into property catastrophe risks, they are also being cautious about pricing and terms. S&P expects them to remain restrictive on their exposure to higher frequency and midsize events, as well as to reduce quota share and aggregate cover offerings. Attachment points are expected to remain high in response to inflation and rising costs.
Despite the high demand for natural catastrophe cover from cedents, reinsurers are likely to maintain their optimism about pricing conditions. The strong returns expected in 2024 could further incentivize reinsurers to expand their property catastrophe portfolios. However, if pricing softens, reinsurers may pull back on increasing their exposure to natural catastrophes. Any signs of weakening conditions could prompt them to be more cautious and disciplined in their approach.
In conclusion, global reinsurers are taking advantage of the current market conditions to expand their property catastrophe business. While they remain optimistic about pricing conditions, they are also being cautious and disciplined in their approach to deploying additional capital. The upcoming renewal season in January 2025 will provide more clarity on how reinsurers will navigate the evolving market dynamics.
